Asset-based Lending – How Can It Assist in Mergers and Acquisitions?

Much like all the other sectors of the economy, COVID-19 has impacted mergers and acquisitions as well. Overall, global M&A transactions were down from $3.4 trillion in 2019 to $2.8 trillion in 2020. However, when it comes to M&As, asset-based lending is a standard tool.

Most businesses don’t want to be in debt. However, often it’s a necessity. So, the question to ask isn’t how to avoid debt but rather what type of debt is right for your business. When it comes to mergers and acquisitions, the answer is clear: asset-based lending.

What are Mergers and Acquisitions?

Mergers and Acquisitions, M&A for short, is an umbrella term for a variety of financial deals, which not only includes mergers and acquisitions but consolidations, management buyouts, management buy-ins, exit strategies, and corporate carve-outs.

Merger deal agreement

How Does Asset-based Lending Help in M&As?

Asset-based lending plays a significant role when it comes to mergers and acquisitions. It’s a flexible form of financing which leverages business assets of a wide variety. These can include debtors, stocks, manufacturing plants and machinery, and real estate property.

Essentially, some or all of the assets are used for a cash flow loan to generate funding for an acquisition. Furthermore, asset-based lending can also consider the assets of the target company being acquired.

Asset-based lending does more than just providing the initial support and funding for the purchase. It also helps generate working capital to help the management team drive growth. Moreover, it’s a great alternative to a typical bank loan which can be a drawn-out process for companies looking to finance an acquisition.

Business owner

Furthermore, traditional lenders may also be uncooperative when it comes to supporting the acquisition and may not buy into your growth vision due to their internal policies. Asset-based lending, on the other hand, is a great flexible option that allows companies to generate cash flow.

Asset-based Lending Is Useful for Asset-Intensive Businesses

Some businesses, by their nature, have more assets than cash flow. Manufacturing industries are the best example of such a situation. However, liquidity is required to be able to finance an acquisition, and just because a traditional bank won’t entertain you, it doesn’t mean there aren’t options.

In such a scenario, asset-based lending is a better option because it even offers better rates due to the presence of collateral. Moreover, it offers the required flexibility that growing businesses need.

If you’re looking for an asset-based lender in Colorado, Utah, Ohio, California, or anywhere else in the US, Global Capital Partners Fund is a perfect choice! The commercial financing and lending company offers asset-based lending options perfectly designed for M&As.

Contact a senior partner at GCP today to learn more about how you can benefit from their asset-based loans.

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